NZD: Asia Wrap - NZD/USD Bounces Off 0.5900
The NZD/USD had a range of 0.5896 - 0.5921 in the Asia-Pac session, going into the London open trading around 0.5920. The USD found some good demand overnight as some positions were pared back heading into the US long weekend. This price action has not followed into our session as fresh selling in USD/ASIA has seen the USD struggle across the board today, Asia's major stock markets had another strong week of inflows with almost $2bn recorded to yesterday.
- Q1 Retail Volumes Up More Than Forecast, Y/Y Pace Edges Higher : New Zealand Q1 retail sales volumes rose 0.8%q/q, versus a flat market forecast. The Q4 rise was also nudged a little higher to +1.0% (against an originally reported 0.9% gain). Today's print is a positive in the sense that other retail/consumer spend indicators have suggested a more adverse backdrop.
- “The Treasury cut projections for bond issuance by NZ$2 billion each of two fiscal years starting in July, The reduction in issuance projections was “tangible positive news,” ANZ senior strategist David Croy writes in a note.”(BBG)
- The NZD/USD has traded quietly bid in Asia today bouncing off the support it found around the 0.5900 area overnight.
- The NZD continues to look comfortable in a 0.5850/0.6050 range and awaits a catalyst to provide the impetus to break-out.
- The support back towards 0.5800 has held very well, and while this continues to hold expect buyers to be around on dips. The first target is the highs just above 0.6000, a break here is needed to regain momentum.
- Options : Closest significant option expiries for NY cut, based on DTCC data: none, Upcoming Strikes : 0.5705(NZD805m May 23), 0.5980(NZD513m May26)
AUD/NZD range for the session has been 1.0862 - 1.0884, currently trading 1.0875. A sustained break above 1.0930 is needed to turn the focus higher, until then expect supply on bounces.
Fig 1: NZD/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg
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US TSYS: Asia Wrap - Yields Drift Lower In The Long End
TYM5 has traded higher with a range of 110-20 to 111-00+ during the Asia-Pacific session. It last changed hands at Heading 110-29, up 0.04 from the previous close.
- The US 10-year yield is drifting lower, dealing around 4.34%, down from its open around 4.40%
- The US 2-year yield is unchanged, dealing around 3.81%
- Risk has reversed higher as Trump makes a U-turn saying he won’t fire Powell and made comments that seemed to soften his stance towards China.
- Block Curve flattener flows : SELL 8200 of USM5 traded at 108-06, post-time 01:25:20 BST (DV01 $353,017). BUY 2800 of USM5 traded at 114-22, post-time 01:25:20 BST (DV01 $353,492).
- 10-year Yields, having bounced off their support around the 4.25 area, yields are consolidating with the range looking something like 4.25/4.50% for now.
Data/Events : US S&P Global Services & Manufacturing PMI, New Home sales
AUSSIE BONDS: Holding A Twist-Flattener, Light Local Calendar
ACGBs (YM -6.0 & XM +1.5) are dealing mixed on a data light Sydney session, with the short-end under pressure as markets re-assess tariff-tied risks to global trade and the Trump Admin's efforts to meddling with the Federal Reserve's independent policy making.
- Risk-on sentiment extended into today’s Asia-Pacific session after US President Trump stated that he had no intention of firing Fed Chair Powell (which has been a cause of concern recently and around the outlook for Fed Independence).
- Trump also stated that the final tariff number for China wouldn't be near the current 145%. He also expressed optimism around trade deals with lots of countries and spoke of the large investment agreements reached for flows into the US.
- Cash US tsys have twist-flattened in today's Asia-Pac session, with yields 2bps higher to 8bps lower.
- Cash ACGBs are 6bps cheaper to 1bps richer with the AU-US 10-year yield differential at -10bps.
- Swap rates are flat to 5bps higher, with the 3s10s curve flatter.
- The bills strip is cheaper with pricing -4 to -9.
- RBA-dated OIS pricing is 2-10bps firmer across meetings today. A 50bp rate cut in May is given a 14% probability, with a cumulative 114bps of easing priced by year-end (based on an effective cash rate of 4.09%).
JGBS: Follows US Tsys Into A Twist-Flattener At Lunch
At the Tokyo lunch break, JGB futures are weaker, -32 compared to the settlement levels, but above session lows.
- Cash US tsys have twist-flattened in today’s Asia-Pac session, with yields 2bps higher to 8bps lower. This comes with risk-on sentiment extending into today’s Asia-Pac session after US President Trump stated that he had no intention of firing Fed Chair Powell (which has been a cause of concern recently and around the outlook for Fed Independence). Such fears were a further weight on broader US asset related sentiment.
- Trump also stated that the final tariff number for China wouldn't be near the current 145%. He also expressed optimism around trade deals with lots of countries and spoke of the large investment agreements reached for flows into the US.
- The cash JGB curve has twist-flattened, pivoting at the 20-year, with yields 4.5bps higher to 5bps lower. The benchmark 10-year yield is 3.6bps higher at 1.351% versus the cycle high of 1.596%.
- The swaps curve has also twist-flattened, with rates 3bps higher to 4bps lower.
- Today, the local calendar has been light, with Jibun Bank PMIs as the highlight. The Tertiary Industry Index is due later. Tomorrow will see PPI Services.
